Grocon office trust in works

A $1 billion Grocon office trust comprising assets held by the Grollo family company could be launched within months depending on market conditions.

Grocon boss Daniel Grollo has confirmed reports in The Australian Financial Review that his family’s private firm is investigating the viability of packaging some its property assets into a publicly listed real estate trust.

Mr Grollo stressed that no final decision had been made on whether to go ahead with the plan.

But advisers had been engaged on the project and market soundings, including approaches to potential cornerstone investors, were due to begin in June, he said.

“We’ve obviously got an appetite for funds management," Mr Grollo said last Friday after an address in Melbourne in his role as Property Council of Australia president.

“We’ve got a capability there and we are looking at the possibility of actually doing something in the listed space around funds management with our own assets. But no decisions have been made and if we are to do something, it’s probably in the second half of this year."

Mr Grollo said he expected “decision time" would be around August/September.

Grocon has been building up its interest and activity in funds management over the past year, since it hired Colonial and Challenger executive Bevan Towning and former Merrill Lynch property head Andrew Kerr.

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Last year, in partnership with Oaktree Capital Management, Grollo made an unsuccessful bid to take over the listed
Multiplex Prime Property Fund
.

The failure of that bid appears to have added to Mr Grollo’s resolve to push ahead in creating his own listed vehicle.

“We want to participate in the funds management area around the assets we produce," Mr Grollo said. “We’ve had a look at a whole lot of things but it would be fair to say what we’ve worked out is it’s much easier to deal with the ones you can control as opposed to the ones you have to compete for and are out of your control."

Grocon has a number of buildings that could pushed into the proposed trust, as well as the pipeline of property projects it has on its books.

Last week, Grocon finalised an $800 million deal to develop ANZ’s Sydney headquarters. The project has buy-in from GPT’s wholesale office fund and Lasalle Investment Management, while Grocon also holds a 25 per cent stake. That investment could be put into the proposed trust, along with Grocon’s stake in the unlisted fund holding the $212 million Docklands headquarters of Axa Asia Pacific.

Other assets that could go into the fund include the $90 million Media House in Docklands and the QV project, a multi-use development which includes three office towers including BHP Billiton’s Melbourne headquarters.

Mr Grollo acknowledged market conditions would ultimately determine the possibility and timing of any float. For its proposed fund, Grocon would be competing for investment dollars against several other big listings in offing – including a potential $4 billion float by Brookfield Asset Managment – as well as raisings by the wholesale property funds.

“There is a degree of uncertainty," Mr Grollo said. “Some of the investors have been hurt in the past and they are probably looking for quality and security."

Grocon’s development activities continue with the marketing of residential elements of the $600 million first stage of Grocon’s redevelopment of the old CUB brewery site in Melbourne set for the second half of this year.